Within days of putting money into YES Bank under a goverment-brokered rescue deal, the investors already have got a handsome payoff. The gainers are a few high net worth individuals (HNIs) and institutions that were allotted shares under the recently announced restructuring scheme for the beleagured lender.
A handful of investors were allotted YES Bank shares at ₹10 apiece on the condition that 75 per cent of their holding would be locked in for three years. But, thanks to the whopping rise in the bank’s share price since the implementation of the scheme, selling just 25 per cent of their holding at the market rate would result in making the balance 75 per cent cost-free for these investors.
Last Friday, the Government published a Gazette notification which said: “There shall be a lock-in period of three years from the commencement of this (YES Bank restructuring) scheme to the extent of 75 per cent in respect of a) shares held by existing shareholders, and b) shares allotted to the investors under this scheme.”
This diktat and the subsequent freeze on the selling of 75 per cent holding created a scarcity in the YES Bank counter. What added to the buying panic was Moody’s upgrade of YES Bank and stock exchanges advancing the date of removal of the scrip from derivatives to March 19 from March 27, leading to a short-squeeze in the futures and options (F&O) segment.
The YES Bank share, which had touched a low of ₹5.55 on March 6 sparking a selling panic and rollout of the preferential allotment scheme, touched a high of ₹64 on Tuesday. This presents a stupendous six-time gain to those who got a preferential allotment at ₹10 apiece.
“Do the math. If one got a preferential allotment of 100 shares at ₹10 a share the total acquisition price is ₹1,000,” said the research head at one of Mumbai’s oldest brokerage houses.
“At the current market price of ₹60, if these acquirers sell just 25 shares, which they are allowed to, they make ₹1,500. The 75 per cent they hold is totally cost-free. Moreover, since YES Bank is being removed from the derivatives segment, the fall is share price from current levels will be limited as one cannot short it. Moody’s upgrade and positive commentary by the RBI on YES Bank, coupled with a short supply of the scrips, will keep the share price up.”
RK Damani, Rakesh Jhunjhunwala and the Azim Premji Trust are among the major non-institutional investors in YES Bank under the government’s restructuring scheme.
State Bank of India, HDFC, ICICI Bank, Axis Bank and Kotak Mahindra Bank are among the institutional investors.